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NBR Stock Down 56% in a Year: Should Investors Hold or Move On?
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Key Takeaways
Nabors' U.S. Drilling EBITDA fell to $92.7M in Q1 2025, with daily margins pressured by rising rig churn.
NBR halted Russia's operations, faces delays in Mexico and holds 20% of rigs in volatile global markets.
High debt, weak free cash flow and SANAD reliance amplify risk as capex and integration costs climb.
Nabors Industries Ltd. (NBR - Free Report) , one of the largest land-drilling contractors in the world, conducts oil, gas and geothermal land drilling operations. NBR stock has declined sharply, down 56% over the past year, significantly underperforming most of its sub-industry peers such as Switzerland-based Transocean Ltd. (RIG - Free Report) , Tulsa, OK-based Helmerich & Payne, Inc. (HP - Free Report) and Houston, TX-based Patterson-UTI Energy, Inc. (PTEN - Free Report) . While the Oils-Energy sector has shown some signs of strength, Nabors has struggled to keep pace, weighed down by falling margins, rising costs and exposure to unstable international markets.
Despite efforts to pivot through acquisitions and international expansion, the company has been hit by a string of operational and financial challenges that raise serious questions about its near-term outlook. For investors, the stock’s decline is not just about broader market conditions, it is about confidence in Nabors' ability to stabilize and grow. So, what exactly has gone wrong? Let us discuss.
What’s Behind NBR’s Underperformance?
Over the past few quarters, Nabors has faced mounting headwinds across nearly every part of its business. Here are the key factors dragging the company down:
Declining U.S. Drilling Margins Due to Rig Churn: Nabors' U.S. Drilling segment reported a sequential decline in adjusted EBITDA from $105.8 million in fourth-quarter 2024 to $92.7 million in first-quarter 2025, due to lower rig counts and operational inefficiencies. Daily margins in the Lower 48 dropped to $14,276 from $14,940, due to elevated rig churn, which increased costs and disrupted contract stability.
NBR’s management acknowledged challenges in aligning expenses with activity levels, estimating only a marginal recovery to $14,100 in the second quarter. This trend suggests sustained pressure in Nabors' core U.S. market, which contributed 44% of total drilling revenues. By contrast, companies like Helmerich & Payne have implemented more stable rig utilization strategies that helped mitigate such declines.
Exposure to Geopolitical Risks in Russia and Other Markets: Hamilton, HM-based oil and gas drilling company suspended operations in Russia due to expanded U.S. sanctions, incurring $28.6 million in non-cash charges. The company does not expect to resume activity there, losing a marginal but stable revenue stream. Additionally, challenges in Colombia and Mexico (e.g., delayed customer payments) highlight risks in emerging markets. With 20% of international rigs in volatile regions, geopolitical instability could further disrupt earnings. International operators such as Transocean have similarly felt the impact of geopolitical risk but have diversified its operations to balance exposure.
High Debt Levels and Limited Free Cash Flow: Nabors' net debt was $2.28 billion in first-quarter 2025, with adjusted free cash flow at a use of $71 million. While management targets debt reduction, near-term cash flow is constrained by $770-$780 million in 2025 capex (including $360 million for SANAD newbuilds). Parker’s acquisition added $178 million in debt and refinancing risks persist amid rising interest rates. The company’s leverage metrics remain a concern for investors seeking financial stability. Meanwhile, Patterson-UTI Energy has focused on strengthening its balance sheet to maintain operational flexibility during volatile market conditions.
Dependence on SANAD Joint Venture for Growth: SANAD contributed significantly to international EBITDA, but its success hinges on Saudi Aramco’s capital discipline. While 15 newbuild rigs are planned by 2026, any slowdown in Aramco’s gas-focused drilling (75% of SANAD’s activity) could derail projections. NBR’s valuation relies heavily on SANAD’s more than $300 million EBITDA target, exposing shareholders to Aramco’s strategic shifts.
Integration Risks From Parker Wellbore Acquisition: The Parker acquisition, while accretive, adds complexity. Nabors aims for $40 million in 2025 synergies, but integration costs ($14 million in the first quarter) and operational overlaps could dilute near-term margins. Parker’s $10 million negative free cash flow in the first quarter and $60 million capex target for 2025 further strain liquidity. Any missteps in merging cultures or systems may erode expected benefits.
Tariff-Related Cost Pressures: NBR’s management expects that U.S. tariffs can impact 2025 free cash flow by $10-$20 million, primarily affecting spare parts and equipment sourced from China. While NBR plans to mitigate this via vendor diversification, prolonged trade tensions may squeeze margins, especially in the Rig Technologies segment, which already saw EBITDA drop to $5.6 million in the first quarter.
Customer Concentration and Payment Delays: Nabors faces receivables issues, notably in Mexico, where $20 million in expected first-quarter collections slipped into the second quarter. Reliance on a few key clients (e.g., Pemex, Aramco) increases vulnerability to payment delays or contract cancellations. The U.S. market’s shift toward smaller, less predictable operators exacerbates this risk. Conversely, Helmerich & Payne has diversified its customer base, which has provided a buffer against similar receivables delays.
Lower 48 Rig Count Volatility: Nabors’ Lower 48 rig count fell to 61 in the first quarter (from 66 in fourth-quarter 2024), reflecting broader industry churn. While management expects a slight recovery to 63-64 rigs in the second quarter, customer surveys indicate a 4% decline in activity among major operators through 2025. This trend could pressure pricing and utilization, undermining Nabors’ U.S. recovery thesis. In this regard, Transocean and Patterson-UTI Energy have shown more resilience in managing rig count volatility through flexible deployment and strategic contracts.
Underperformance Compared With Peers: Over the past year, Nabors’ share price has dropped significantly more than many of its peers in the oil and gas sector. The company’s share price fell 56.4% compared with a 45.7%, 50.9% and 39.1% decline of Transocean, Helmerich & Payne and Patterson-UTI Energy, respectively. It also lagged behind the Drilling Oil and Gas industry, which declined 40.9%, while the overall Oils-Energy sector saw a rise of 3.6%. This highlights that Nabors’ share price has clearly underperformed relative to both its industry peers and the wider energy market.
Yearly Highs and Lows: A Snapshot
Image Source: Zacks Investment Research
Final Words: Avoid NBR Stock
The Zacks Rank #4 (Sell) company currently faces several headwinds impacting its performance and outlook. Declining U.S. drilling margins, due to rig churn and operational inefficiencies, are pressuring core revenue streams, while geopolitical risks in Russia and emerging markets add uncertainty. High debt levels and limited free cash flow constrain financial flexibility, exacerbated by integration costs from the Parker acquisition and tariff-related cost pressures.
Additionally, reliance on the SANAD joint venture ties growth prospects to Saudi Aramco’s strategy, creating further exposure. Combined with customer payment delays and significant share price underperformance versus peers, these factors indicate substantial risks ahead for investors.
Until the company demonstrates stronger financial performance and operational stability, it is advisable to look elsewhere for opportunities in the oil and gas sector.
Image: Shutterstock
NBR Stock Down 56% in a Year: Should Investors Hold or Move On?
Key Takeaways
Nabors Industries Ltd. (NBR - Free Report) , one of the largest land-drilling contractors in the world, conducts oil, gas and geothermal land drilling operations. NBR stock has declined sharply, down 56% over the past year, significantly underperforming most of its sub-industry peers such as Switzerland-based Transocean Ltd. (RIG - Free Report) , Tulsa, OK-based Helmerich & Payne, Inc. (HP - Free Report) and Houston, TX-based Patterson-UTI Energy, Inc. (PTEN - Free Report) . While the Oils-Energy sector has shown some signs of strength, Nabors has struggled to keep pace, weighed down by falling margins, rising costs and exposure to unstable international markets.
Despite efforts to pivot through acquisitions and international expansion, the company has been hit by a string of operational and financial challenges that raise serious questions about its near-term outlook. For investors, the stock’s decline is not just about broader market conditions, it is about confidence in Nabors' ability to stabilize and grow. So, what exactly has gone wrong? Let us discuss.
What’s Behind NBR’s Underperformance?
Over the past few quarters, Nabors has faced mounting headwinds across nearly every part of its business. Here are the key factors dragging the company down:
Declining U.S. Drilling Margins Due to Rig Churn: Nabors' U.S. Drilling segment reported a sequential decline in adjusted EBITDA from $105.8 million in fourth-quarter 2024 to $92.7 million in first-quarter 2025, due to lower rig counts and operational inefficiencies. Daily margins in the Lower 48 dropped to $14,276 from $14,940, due to elevated rig churn, which increased costs and disrupted contract stability.
NBR’s management acknowledged challenges in aligning expenses with activity levels, estimating only a marginal recovery to $14,100 in the second quarter. This trend suggests sustained pressure in Nabors' core U.S. market, which contributed 44% of total drilling revenues. By contrast, companies like Helmerich & Payne have implemented more stable rig utilization strategies that helped mitigate such declines.
Exposure to Geopolitical Risks in Russia and Other Markets: Hamilton, HM-based oil and gas drilling company suspended operations in Russia due to expanded U.S. sanctions, incurring $28.6 million in non-cash charges. The company does not expect to resume activity there, losing a marginal but stable revenue stream. Additionally, challenges in Colombia and Mexico (e.g., delayed customer payments) highlight risks in emerging markets. With 20% of international rigs in volatile regions, geopolitical instability could further disrupt earnings. International operators such as Transocean have similarly felt the impact of geopolitical risk but have diversified its operations to balance exposure.
High Debt Levels and Limited Free Cash Flow: Nabors' net debt was $2.28 billion in first-quarter 2025, with adjusted free cash flow at a use of $71 million. While management targets debt reduction, near-term cash flow is constrained by $770-$780 million in 2025 capex (including $360 million for SANAD newbuilds). Parker’s acquisition added $178 million in debt and refinancing risks persist amid rising interest rates. The company’s leverage metrics remain a concern for investors seeking financial stability. Meanwhile, Patterson-UTI Energy has focused on strengthening its balance sheet to maintain operational flexibility during volatile market conditions.
Dependence on SANAD Joint Venture for Growth: SANAD contributed significantly to international EBITDA, but its success hinges on Saudi Aramco’s capital discipline. While 15 newbuild rigs are planned by 2026, any slowdown in Aramco’s gas-focused drilling (75% of SANAD’s activity) could derail projections. NBR’s valuation relies heavily on SANAD’s more than $300 million EBITDA target, exposing shareholders to Aramco’s strategic shifts.
Integration Risks From Parker Wellbore Acquisition: The Parker acquisition, while accretive, adds complexity. Nabors aims for $40 million in 2025 synergies, but integration costs ($14 million in the first quarter) and operational overlaps could dilute near-term margins. Parker’s $10 million negative free cash flow in the first quarter and $60 million capex target for 2025 further strain liquidity. Any missteps in merging cultures or systems may erode expected benefits.
Tariff-Related Cost Pressures: NBR’s management expects that U.S. tariffs can impact 2025 free cash flow by $10-$20 million, primarily affecting spare parts and equipment sourced from China. While NBR plans to mitigate this via vendor diversification, prolonged trade tensions may squeeze margins, especially in the Rig Technologies segment, which already saw EBITDA drop to $5.6 million in the first quarter.
Customer Concentration and Payment Delays: Nabors faces receivables issues, notably in Mexico, where $20 million in expected first-quarter collections slipped into the second quarter. Reliance on a few key clients (e.g., Pemex, Aramco) increases vulnerability to payment delays or contract cancellations. The U.S. market’s shift toward smaller, less predictable operators exacerbates this risk. Conversely, Helmerich & Payne has diversified its customer base, which has provided a buffer against similar receivables delays.
Lower 48 Rig Count Volatility: Nabors’ Lower 48 rig count fell to 61 in the first quarter (from 66 in fourth-quarter 2024), reflecting broader industry churn. While management expects a slight recovery to 63-64 rigs in the second quarter, customer surveys indicate a 4% decline in activity among major operators through 2025. This trend could pressure pricing and utilization, undermining Nabors’ U.S. recovery thesis. In this regard, Transocean and Patterson-UTI Energy have shown more resilience in managing rig count volatility through flexible deployment and strategic contracts.
Underperformance Compared With Peers: Over the past year, Nabors’ share price has dropped significantly more than many of its peers in the oil and gas sector. The company’s share price fell 56.4% compared with a 45.7%, 50.9% and 39.1% decline of Transocean, Helmerich & Payne and Patterson-UTI Energy, respectively. It also lagged behind the Drilling Oil and Gas industry, which declined 40.9%, while the overall Oils-Energy sector saw a rise of 3.6%. This highlights that Nabors’ share price has clearly underperformed relative to both its industry peers and the wider energy market.
Yearly Highs and Lows: A Snapshot
Image Source: Zacks Investment Research
Final Words: Avoid NBR Stock
The Zacks Rank #4 (Sell) company currently faces several headwinds impacting its performance and outlook. Declining U.S. drilling margins, due to rig churn and operational inefficiencies, are pressuring core revenue streams, while geopolitical risks in Russia and emerging markets add uncertainty. High debt levels and limited free cash flow constrain financial flexibility, exacerbated by integration costs from the Parker acquisition and tariff-related cost pressures.
Additionally, reliance on the SANAD joint venture ties growth prospects to Saudi Aramco’s strategy, creating further exposure. Combined with customer payment delays and significant share price underperformance versus peers, these factors indicate substantial risks ahead for investors.
Until the company demonstrates stronger financial performance and operational stability, it is advisable to look elsewhere for opportunities in the oil and gas sector.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.